Archives: Quiz

1) solvency ratios measure the short-term ability of the company to pay its maturing obligations. 2) owners of business firms are the only people who need accounting information. Answer: f 3) when no-par value stock does not have a stated […]

1) discount on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the effective-interest method. 2) transactions are entered in the ledger […]

1) the inventory turnover ratio is calculated as cost of goods sold divided by ending inventory. 2) a stock dividend will cause an increase in total contributed capital at the date the dividend is declared. Answer: t 3) a credit […]

1) franchises are classified as a plant asset. 2) if a bond has a stated value of $1,000 and a contractual interest rate of 6 percent, then the interest paid annually will be $60. Answer: t 3) vertical analysis is […]

1) an error that overstates the ending inventory will also cause net income for the period to be overstated. 2) the economic entity assumption states that economic events can be identified with a particular unit of accountability. Answer: t 3) […]

1) the par value of common stock must always be equal to its market value on the date the stock is issued. 2) income from operations appears on both the single-step and multiple-step forms of an income statement. Answer: f […]

1) during the month, a company sells goods for a total of $106,000, which includes sales taxes of $6,000; therefore, the company should recognize $100,000 in sales revenues and $6,000 in sales tax expense. 2) the book value of a […]

1) cash and supplies are both classified as current assets. 2) a liability is classified as a current liability if it is to be paid within the coming year. Answer: t 3) allowance for doubtful accounts is a contra account […]

1) a material item is one that is likely to affect a users decision. 2) if the fair value of an available-for-sale security exceeds its cost, the security should be written up to fair value and a realized gain should […]

1) control over cash disbursements is improved if major expenditures are paid by check. 2) because pro forma earnings are based on specific rules, these amounts are highly reliable. Answer: f 3) under the double-entry system, revenues must always equal […]

1) the current market value of a bond is equal to the present value of all future cash payments promised by the bond. 2) the current ratio takes into account the composition of current assets. Answer: f 3) a debit […]

1) unearned revenues are received before goods are delivered or services are rendered. 2) for accounting purposes, business transactions should be kept separate from the personal transactions of the stockholders of the business. Answer: t 3) all reconciling items in […]

1) if a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement. 2) the valuation of available-for-sale securities is similar to the procedures followed for trading […]

1) the convention of consistency pertains to the use of the same accounting principles by firms in the same industry. 2) free cash flow is cash from operations less dividends. Answer: f 3) a corporation is not an entity that […]

1) consistency in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next accounting period. 2) when the due date of a note is stated in months, the time factor in […]

1) under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs. 2) cash is another term for stockholders equity. Answer: f 3) ordinary repairs should be recognized when incurred as revenue expenditures. Answer: […]

1) if the assets owned by a business total $100,000 and liabilities total $65,000, stockholders equity totals $25,000. 2) additions and improvements to a plant asset that increase the asset’s operating efficiency, productive capacity, or expected useful life are generally […]

1) trading activity and average returns in brokerage accounts tend to be _________. a.uncorrelated b.negatively correlated c.positively correlated d.positively correlated for women and negatively correlated for men 2) an investor’s degree of risk aversion will determine his or her ______. […]

1) the stock price of ajax inc. is currently $105. the stock price a year from now will be either $130 or $90 with equal probabilities. the interest rate at which investors can borrow is 10%. using the binomial opm, […]

1) two investment advisers are comparing performance. adviser a averaged a 20% return with a portfolio beta of 1.5, and adviser b averaged a 15% return with a portfolio beta of 1.2. if the t-bill rate was 5% and the […]

1) a firm that has large securities holdings and wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following? a.reverse repurchase agreement b.bankers’ acceptance c.commercial paper d.repurchase […]

1) initial public offerings (ipos) are usually ___________ relative to the levels at which their prices stabilize after they begin trading in the secondary market. a.overpriced b.correctly priced c.underpriced d.mispriced, but without any particular bias 2) debondt and thaler (1985) […]

1) savings are generated whenever: a.prices are rising. b.current spending exceeds current income. c.current income exceeds current spending. d.real gdp exceeds nominal gdp 2) during a period when prices have been rising, the _________ will be _______ the current price. […]

1) among emerging countries the largest equity market in 2011 was located in _____________. a.china b.india c.brazil d.russia 2) two assets have the following expected returns and standard deviations when the risk-free rate is 5%: an investor with a risk […]

1) the capital asset pricing model was developed by _________. a.kenneth french b.stephen ross c.william sharpe d.eugene fama 2) why are high rates of unemployment of concern to economists? a.higher rates of unemployment are linked to higher crime rates and […]

1) which fidelity magellan portfolio manager is often referenced as an exception to the general conclusion of efficient markets? a.jeff vinik b.peter lynch c.robert stansky d.william hayes 2) which of the following is not considered a money market investment? a.bankers’ […]

1) the confidence index on day 1 is _____. a..82 b..89 c..92 d.1.09 2) the put/call ratio is a ______ indicator. a.sentiment b.flow of funds c.market structure d.fundamental Answer: a 3) specialists try to maintain a narrow bid-ask spread because: […]

1) all of the following ratios are related to efficiency except _______. a.total asset turnover b.fixed-asset turnover c.average collection period d.cash ratio 2) everything else equal, which variable is negatively related to the intrinsic value of a company? a.d1 b.d0 […]

1) which of the following typically employ significant amounts of leverage? i. hedge funds ii. reits iii. money market funds iv. equity mutual funds a.i and ii only b.ii and iii only c.iii and iv only d.i, ii, and iii […]

1) an analyst starts by examining the broad economic environment and then considers the implications of the economy on the industry in which the firm operates. finally, the firm’s position within the industry is examined. this is called __________ analysis. […]

1) you find that the bid and ask prices for a stock are $10.25 and $10.30, respectively. if you purchase or sell the stock, you must pay a flat commission of $25. if you buy 100 shares of the stock […]

1) the nominal interest rate is 10%. the real interest rate is 4%. the inflation rate must be _________. a.-6% b.4% c.5.77% d.14.4% 2) published data on past returns earned by mutual funds are required to be ______. a.dollar-weighted returns […]

1) when technical analysts say a stock has good “relative strength,” they mean that in the recent past __________. a.it has performed well compared to its closest competitors b.it has exceeded its own historical high c.trading volume in the stock […]

1) the yield on tax-exempt bonds is ______. a.usually less than 50% of the yield on taxable bonds b.normally about 90% of the yield on taxable bonds c.greater than the yield on taxable bonds d.less than the yield on taxable […]

1) in the treynor-black model, security analysts __________. a.analyze the entire universe of stocks b.assume that markets are inefficient c.treat market index as a baseline portfolio from which an active portfolio is constructed d.focus on selecting the best-performing bogey 2) […]

1) conservative investors are likely to want to invest in __________ mutual funds, while risk-tolerant investors are likely to want to invest in __________. a.income; high growth b.income; moderate growth c.moderate-growth; high growth d.high-growth; moderate growth 2) which one of […]

1) in an efficient market and for an investor who believes in a passive approach to investing, what is the primary duty of a portfolio manager? a.accounting for results b.diversification c.identifying undervalued stocks d.no need for a portfolio manager 2) […]

1) an investor can design a risky portfolio based on two stocks, a and b. the standard deviation of return on stock a is 20%, while the standard deviation on stock b is 15%. the correlation coefficient between the returns […]

1) one-, two-, and three-year maturity, default-free, zero-coupon bonds have yields to maturity of 7%, 8%, and 9%, respectively. what is the implied 1-year forward rate 1 year from today? a.2.07% b.8.03% c.9.01% d.11.12% 2) it appears from empirical work […]

1) in 1973, trading of standardized options on a national exchange started on the _________. a.amex b.cboe c.nyse d.cftc 2) the value of a listed call option on a stock is lower when: i. the exercise price is higher. ii. […]

1) in the context of a bond portfolio, price risk and reinvestment rate risk exactly cancel out at a time horizon equal to the ____. a.average bond maturity in the portfolio b.duration of the portfolio c.difference between the shortest duration […]

1) the u.s. income tax code is generally _____. a.regressive b.progressive c.flat d.peaked 2) the fama and french evidence that high book-to-market firms outperform low book-to-market firms even after adjusting for beta means that _________. a.high book-to-market firms are underpriced […]

1) everything else equal, an increase in the government budget deficit would: i. increase the government’s demand for funds ii. shift the demand curve for funds to the left iii. increase the interest rate in the economy a.ii only b.i […]

1) a firm has pvgo of 0 and a market capitalization rate of 12%. what is the firm’s p/e ratio? a.12 b.8.33 c.10.25 d.18.55 2) a tax free municipal bond provides a yield of 2.34%. what is the equivalent taxable […]

1) the current stock price of alcoa is $70, and the stock does not pay dividends. the instantaneous risk-free rate of return is 6%. the instantaneous standard deviation of alcoa’s stock is 40%. you want to purchase a put option […]

1) a stock’s alpha measures the stock’s ____________________. a.expected return b.abnormal return c.excess return d.residual return 2) the new york stock exchange is a good example of _________. a.an auction market b.a brokered market c.a dealer market d.a direct search […]

1) money market securities are sometimes referred to as cash equivalents because _____. a.they are safe and marketable b.they are not liquid c.they are high-risk d.they are low-denomination 2) a firm’s earnings per share increased from $10 to $12, its […]

1) you pay $216,000 to the capital hedge fund, which has a price of $18 per share at the beginning of the year. the fund deducted a front-end commission of 4%. the securities in the fund increased in value by […]

1) the risk premium for exposure to exchange rates is 5%, and the firm has a beta relative to exchange rates of .4. the risk premium for exposure to the consumer price index is -6%, and the firm has a […]

1) which one of the following exploits differences between actual future prices and their theoretically correct parity values? a.index arbitrage b.marking to market c.reversing trades d.settlement transactions 2) the duration of a perpetuity varies _______ with interest rates. a.directly b.inversely […]